NTPC's Strategic Cost Revision for Rammam-III Hydro Project: A Pivotal Move in India's Clean Energy Transition

NTPC Limited’s recent approval of a revised cost estimate of ₹2,865.56 crore for the Rammam-III Hydro Electric Power Project (HEPP) marks a significant shift in the company’s renewable energy strategy. Originally budgeted at ₹1,381.84 crore in 2014, the project’s cost has more than doubled due to inflation, material price surges, and unforeseen execution challenges [1]. The 120 MW run-of-the-river facility, located in West Bengal’s Darjeeling district, is now slated for completion by March 2029, a decade later than the initial 2019 target [2]. This delay and cost escalation underscore the complexities of large-scale infrastructure projects but also reflect NTPC’s unwavering commitment to its long-term vision of achieving 60 GW of non-fossil fuel capacity by 2032 [3].

Revised Economics and Strategic Rationale

The Rammam-III HEPP’s revised budget includes critical infrastructure such as an 8.2 km headrace tunnel, a surge shaft, and a 1,520-meter vertical penstock [4]. While the project’s financial metrics—such as ROI or IRR—remain undisclosed, NTPC’s broader renewable energy performance provides context. For instance, NTPC Green Energy Limited (NGEL), the company’s renewable arm, reported a 59% year-on-year net profit increase in Q1 FY26, driven by 3.4 GW of commissioned capacity and 7.4 GW under implementation [5]. This suggests that NTPC’s renewable projects, including Rammam-III, are designed to deliver scalable returns despite upfront capital intensity.

The cost revision also aligns with India’s national renewable energy targets. The country aims to reach 500 GW of non-fossil fuel capacity by 2030, with hydropower playing a crucial role in grid stability and complementing intermittent solar and wind generation [6]. Rammam-III’s 120 MW capacity, while modest in isolation, contributes to this broader goal and positions NTPC as a key player in India’s energy transition.

Alignment with India’s 500 GW Target

India’s renewable energy sector has made remarkable progress, with total capacity surpassing 220 GW as of March 2025 [7]. The government’s aggressive policy framework, including renewable purchase obligations and falling technology costs, has accelerated this growth. Rammam-III’s completion by 2029 will add to this momentum, particularly in West Bengal, where hydropower projects are vital for balancing the state’s energy mix [8].

Moreover, NTPC’s decision to transfer its coal mining operations to a subsidiary, NTPC Mining Limited, signals a strategic pivot toward renewables [9]. This move not only streamlines operations but also allows NTPC to focus on high-impact projects like Rammam-III, which align with both corporate and national sustainability goals.

Investment Case and Long-Term Viability

While specific ROI or IRR figures for Rammam-III are not publicly available, the project’s long-term viability is supported by several factors. First, hydropower’s low operational costs and long asset life (typically 50+ years) ensure stable returns over time. Second, NTPC’s track record in executing large-scale projects—despite delays—demonstrates its ability to overcome challenges and deliver value. Third, the project’s alignment with India’s 500 GW target creates a favorable regulatory and market environment, reducing policy risks for investors.

Conclusion

NTPC’s revised cost estimate for Rammam-III reflects the realities of modern infrastructure development but also highlights the company’s strategic foresight in prioritizing renewable energy. As India races toward its 500 GW target, projects like Rammam-III will be critical in bridging the gap between ambition and execution. For investors, NTPC’s commitment to diversifying its energy portfolio—while maintaining profitability through initiatives like NGEL—makes it a compelling long-term bet in the clean energy transition.

Source:
[1] NTPC Board Approves ₹2866 Crore Revised Cost for Rammam-III Hydro Project [https://scanx.trade/stock-market-news/corporate-actions/ntpc-board-approves-2-866-crore-revised-cost-for-rammam-iii-hydro-project/17980421]
[2] NTPC more than doubles Rammam-III HEPP cost estimate to Rs 2865.56 crore [https://psuwatch.com/newsupdates/ntpc-more-than-doubles-rammam-iii-hepp-cost-estimate-to-rs-286556-crore]
[3] NTPC Revises Rammam-III Hydroelectric Project Cost to ₹2865.56 crore [https://elitewealth.in/ntpc-revises-rammam-iii-hydroelectric-project-cost-to-%E2%82%B92865-crore-approves-coal-mining-business-transfer/]
[4] Rammam-III HEPP Cost More Than Doubles to Rs 2865 Cr [https://indianmasterminds.com/news/psu-news/rammam-iii-hepp-cost-doubles-2025-140536/]
[5] India's Renewable Energy Surge: NTPC Green Energy Q1 FY26 Results Signal Sector Breakout Potential [https://www.ainvest.com/news/india-renewable-energy-surge-ntpc-green-energy-q1-fy26-results-signal-sector-breakout-potential-2507/]
[6] India's Renewable Energy Expansion (Target: 500 GW by 2030) [https://connectekias.com/indias-renewable-energy-expansion-target-500-gw-by-2030/]
[7] India's Renewable Energy Capacity Achieves Historic Growth in FY 2024-25 [https://www.pib.gov.in/PressReleasePage.aspx?PRID=2120729]
[8] Attend to transmission & land issues for achieving target of 500 GW RE generation [https://www.thehindu.com/news/national/karnataka/attend-to-transmission-land-issues-for-achieving-target-of-500-gw-re-generation-industry-urges-governments/article69929807.ece]
[9] NTPC shares in focus on Rs 7735 cr coal mining transfer plan to subsidiary [https://m.economictimes.com/markets/stocks/news/ntpc-shares-in-focus-on-rs-7735-cr-coal-mining-transfer-plan-to-subsidiary/articleshow/123575850.cms]